Bankamerica Poised to Move East

Bankamerica Poised to Move East

Article excerpt

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By Andrew Pollack SAN FRANCISCO - When BankAmerica Corp. was
reeling from losses a few years ago, executives renounced their
global ambitions and said they would concentrate on retail banking in
California and the West.

The bank's executives still say that, only now they joke that
``West'' means anything west of Bermuda. That is because
BankAmerica is now poised to make itself a major presence on the
East Coast if it wins the bidding for the insolvent Bank of New
England.

Even if BankAmerica is not chosen by federal regulators, who are
expected to announce their decision Wednesday, bank executives and
analysts say there will be other expansion opportunities for the San
Francisco-based bank, the nation's second largest behind Citicorp.

Only five years ago, BankAmerica, the parent company of
California's Bank of America, was the laughingstock of the industry.
But through divestitures, employee layoffs and management changes it
has made a breathtaking recovery and is now far stronger than most
of its major competitors.

So, while the big New York banks and some of its California
rivals nurse problems caused by a stack of bad real estate loans,
BankAmerica is in a unique position to seize the opportunity and
create the first truly nationwide retail bank.

``The Bank of America could emerge as one of the few American
banks that has got key critical market shares,'' said Thomas Hanley,
banking analyst at Salomon Brothers. ``If you give them another two
to three years, they will truly be nationwide in scope.''

Some industry executives and analysts have questioned the wisdom
of BankAmerica's bid for the Bank of New England.

Even if BankAmerica gets a bank without bad loans, the bank
still might not make any money, they say. And managing an
institution across the country might be hard.

Frank N. Newman, BankAmerica's vice chairman and chief financial
officer, said that BankAmerica believed the New England economy
would eventually recover. He also said BankAmerica's international
business gave it experience in running banks far afield.

He said BankAmerica planned to keep much of the Bank of New
England's management team, which is new and considered not
responsible for the bank's failure earlier this year.

BankAmerica has already spent more than $600 million for 12
institutions in the last 18 months, most of them insolvent savings
and loans bought with federal assistance.

The acquisitions brought BankAmerica 373 new branches and $14
billion in deposits and expanded its network from California and
Washington into six other Western states.

For a bank that had its own near-death experience just a few
years ago, such a rapid expansion might seem foolhardy. The moves
could risk diluting management and exposing BankAmerica to uncertain
economies in New England and Arizona at a time when California's own
economic outlook is uncertain.

But Newman said the way the acquisitions had been handled, with
regulators removing the bad loans from the failed institutions, also
removed much of the risks for the new owner.

Indeed, buying failed institutions is turning out to be such an
attractive way for banks to expand that Congress has started
criticizing federal regulators for arranging deals that some
lawmakers contend are too sweet for the acquirer.

Newman said BankAmerica was being driven by a vision that ``in
the long run, national banking was just going to make sense for this
nation and the decade of the '90s was when it's going to occur.''
But he said BankAmerica was being prudent.

The bank had not been thinking of expanding elsewhere in the
nation so soon, but as its New England bid shows, it is willing to
jump if the opportunity presents itself. BankAmerica is believed to
be interested in Illinois, the Mid-Atlantic region, and in Florida
and other parts of the Southeast. …